Obamacare Is Getting Cheaper

CBO says the law will cost taxpayers less than expected, and predicts only a slight increase in premiums next year.

The most expensive provisions of Obamacare will cost taxpayers about $100 billion less than expected, the Congressional Budget Office said Monday.

CBO also said it doesn't expect big premium increases next year for insurance plans sold through the health care law's exchanges.

In its latest analysis, CBO said the law's coverage provisions—a narrow part of the law that includes only certain policies—will cost the government $36 billion this year, which is $5 billion less than CBO's previous estimate. Over the next decade, the provisions will cost about $1.4 trillion—roughly $104 billion less than CBO last estimated.

The analysis covers only a part of the Affordable Care Act. The costs outlined in Monday's report, including the Medicaid expansion and subsidies to private insurance, are offset by other provisions that raise taxes or cut spending. On balance, CBO says, the law will reduce the federal deficit.

Monday's report also sheds some light on one of the big challenges still to come for Obamacare: next year's premiums. Some critics have warned that premiums could skyrocket next year, based in part on the demographics of the people who signed up for coverage this year.

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But CBO isn't expecting a big hike. The budget office says it expects the average premium to rise "slightly" in 2015, by about $100 per year for the middle-of-the-road plans that have proven to be the most popular option in the exchanges.

Premium increases from 2016 on will likely be higher, averaging about 6 percent per year, CBO said. That's a nationwide average; some areas of the country will see bigger jumps, others will see smaller increases. But if CBO's projections pan out, the average increase would still fall short of the double-digit hikes some insurers have predicted.

CBO said rising health care costs—not the risk pool of Obamacare enrollees—is the biggest factor driving its anticipated premium hikes. The people signing up for coverage in the exchanges next year will probably be healthier than those who signed up this year, CBO said, keeping premiums in check.

The budget office also expects insurers to relax some of the tools they have used to keep premiums low—namely, limited networks of doctors and other providers, and particularly low payments to those providers. As enrollment grows, CBO said, "many plans will not be able to sustain provider payment rates that are as low or networks that are as narrow as they appear to be in 2014."